Japan and Korea sell-off

US stock indices ended Tuesday’s session lower across the board as weakness in the technology sector weighed heavily on sentiment. The NASDAQ lost 2% as AI-related names posted losses amid concerns that valuations have become stretched.

The S&P 500 fell 1.2% while the old-school Dow got off quite lightly, ending down 0.5%. But in an indication that sentiment had soured somewhat outside of tech as well, the small cap, domestically focused Russell 2000 gave back 1.8% yesterday. The NASDAQ 100 has dropped 3.5% from the highs hit last week, but the Russell has lost 4.6% from its own record levels reached a few days earlier.

Source: TN Trader

Investors were scratching their heads initially in trying to pinpoint a catalyst for the selloff. As far as the macro environment was concerned, US Treasuries were subdued, while there were no big moves across the FX space. But the blame was ultimately laid at Palantir’s door.

The software giant, which has gone from strength to strength since it launched its Artificial Intelligence Platform two years ago, released its latest results after Monday’s close. These were exceptionally good, as was the company’s guidance for the fourth quarter. The stock flew higher initially but then reversed sharply. Palantir lost 8% from its opening price on Monday to yesterday's low. Analysts pointed to Palantir’s extraordinarily high valuation, which is many multiples above even Nvidia’s.

Even considering this week's losses, Palantir’s stock price is up 265% over the last twelve months. But sentiment towards the company, and the AI trade in general, also took a hit after it was revealed that Michael Burry, a key player in the Great Financial Crisis and featured in ‘The Big Short’, was running large short positions on both Palantir and Nvidia.

If you remember the film, Mr Burry, as played by Christian Bale, ultimately won a fortune through shorting the US housing market. But not before he came close to losing everything, as it took such a long time for his bets to play out.

US stock index futures were mixed in overnight trade. The tech sector remains a focus, particularly as investors have put any concerns over the US-China trade spat to one side. But the ongoing US government shutdown means that many key data releases have been postponed or cancelled, including this Friday’s Non-Farm Payroll report, for the second month in a row.

The Federal Reserve has made it clear that they are concerned about possible weakness in the labour market, although Chair Powell warned that another rate cut in December is not a foregone conclusion.

So, all eyes will be on today's ADP private payroll release. If this comes in below expectations, as some analysts are suggesting, then markets may start to price back in another rate cut next month. Also on the docket is the ISM Services PMI, while there are earnings reports from McDonald’s, Qualcomm, Arm and DoorDash.

European stock indices were lower across the board this morning. Investors reacted to yesterday’s selloff across Wall Street, which spread to Asian Pacific equities overnight. With US stock index futures being a mixed bag in today’s early trade, it makes sense to approach European equities with some caution.

But there was some good news for investors as a clutch of Services PMIs from across the Eurozone came in better-than-expected and showed clear signs of a month-on-month improvement. German Factory Orders were also positive, as was France’s Industrial Production. Even the UK managed an uptick in its Services PMI, with the sector still in expansion mode.

Source: TN Trader

Forex markets were very subdued in early trade on Wednesday. The US dollar inched up a few cents with the Dollar Index creeping closer to the 100.00 level. Obviously, this is a clear target for the dollar bulls as, psychologically, it’s a nice round number. But it has also acted as a resistance in May and August this year.

So, a prolonged break above here, plus this level holding as support on any pullbacks, would be a positive signal for the US dollar overall. Bear in mind that it took the Dollar Index several attempts to break above 99.00 last month. But once it did, prices accelerated to the upside.

Countering this, though, is the fact that the latest leg in the Index’s rally has lasted over a week without any significant pullback. It feels as if one is overdue. But whether the Dollar Index turns lower after attempting to break above 100.00 or not, remains to be seen.

Source: TN Trader

Meanwhile, sterling continues to lose ground as investors consider the parlous state of the UK economy, and the likelihood that Chancellor Rachel Reeves will only make things worse at her Budget in two weeks' time. Before that, the Bank of England will announce its latest monetary policy decision tomorrow.

Most analysts believe they will keep interest rates unchanged at 4.0%, preferring to wait until after the budget and then consider a cut in December. But there are some who think the Bank may go for a quarter point cut tomorrow, betting that inflation has already topped just below 4%, double the Bank’s 2% target rate. The GBP/USD slipped towards 1.3000 - its weakest level since April.

Gold rebounded overnight, making back some of yesterday’s losses. It found some support around $3,930 but is still well adrift from the key $4,000 level, which it proved unable to hold this week.

The move reflected some cautious buying after several sessions of sustained selling pressure. Just over a fortnight ago, gold traded at a new all-time high of $4,381. But it went on to sell off sharply, breaking below $3,900 just one week later.

Source: TN Trader

It appears to be trying to consolidate now, and there’s no doubt that these latest moves have helped bring the daily MACD down from seriously overbought levels towards a more neutral area. But it is still far too early to suggest that gold is bottoming around current levels. And while it’s possible that buyers may step back in to push it higher, gold may need to correct further to the downside to form a base from which it could initiate a more substantial rally.  

Silver also managed to rebound this morning after yesterday’s drop. But it remains below $48 per ounce, and only 4% above the recent low hit this time last week. Like gold, it appears that silver is attempting to consolidate at current levels.

The price has corrected from significantly overbought levels, and the daily MACD has dropped back to zero from its peak of 260 from mid-October. That may give the bulls something to consider, although, as with gold, it still feels as if silver could have further to fall before it can form a base for a fresh leg of any rally.

Source: TN Trader

The US dollar continues to strengthen, and in the current situation, this puts a lid on precious metals prices. But any significant pullback in the dollar from current levels could provide the catalyst for a fresh round of buying in silver.

Oil prices were largely unchanged this morning. Front month WTI continued to hold above $60 per barrel, and this level is building as support on a closing basis. The market remained steady as traders considered the latest inventory update from the American Petroleum Institute (API). The API reported an increase in US stockpiles of 6.5 million barrels last week.

Source: TN Trader

If confirmed, this could be the biggest inventory build since July. The data added to supply concerns that have persisted for several months, especially with global production continuing to climb. The US Energy Information Administration will release its own update later this afternoon.  

At current levels, WTI has dropped around 25% since the highs hit in mid-January this year. This reflects persistent worries about oversupply, even as the outlook for global demand growth continues to moderate. OPEC+ has announced that there will be no further production increases for the first quarter of 2026. The group has spent most of this year unwinding earlier production cuts designed to boost prices.

Natural gas prices slipped around 2% on the day, pulling back from yesterday’s highs. On Tuesday, Natural Gas traded at its best levels since March and despite today’s sell-off, prices remained elevated overall.

The softer tone reflected some light profit-taking after recent gains, as market participants awaited new developments that could provide direction. Despite the dip, gas markets continued to display underlying resilience, suggesting that recent strength may persist if broader energy trends remain supportive.

Cryptocurrency markets saw a notable recovery overnight after a sharp selloff the previous day. Bitcoin rebounded after briefly dipping below $100,000 to hit its lowest level since June. Ether also regained some lost ground after its crash at the beginning of this week. From Sunday's close to yesterday’s low, Ether dropped over 20%.

This morning’s bounce suggested that bargain hunters were anxious to take advantage of the selloff. But it remains to be seen if these buyers are in for the long haul or just looking to scalp a few points. Overall, sentiment remains fragile and risk appetite is limited.

Traders appeared cautious about chasing the rebound, with the broader crypto market still under pressure from shifting risk dynamics and concerns about valuation. Despite the uptick, the overall tone remained defensive, and the near-term outlook continued to hinge on broader market stability.

The VIX index remained elevated this morning, suggesting that market participants are still on alert for further volatility. The index’s steady climb over the past week or so reflects a buildup in investor caution as equities retreat, and risk sentiment softens.

Volatility has crept higher alongside rising concerns over stretched valuations in the technology sector and uncertainty around the trajectory of interest rates. The elevated VIX highlights a growing appetite for downside protection as traders brace for more turbulence ahead.

The key question for investors remains whether this latest pullback marks the beginning of a broader correction or simply another temporary pause in the rally. The sharp declines in AI-related names, led by Palantir, have reignited the debate about valuations and the sustainability of the sector’s rapid gains.

Attention will turn to McDonald’s earnings today, which could influence sentiment in the Dow, while traders also keep a close eye on movements in crypto and the VIX as indicators of broader market mood. For now, the bias remains cautious as markets appear to be searching for a new footing amid growing uncertainty.